Reisner yesterday filed a one-sentence “notice of
appearance” in federal court in Manhattan, indicating he will
participate in the case. Reisner, who worked at the law firm
Debevoise & Plimpton LLP before joining the SEC last year, was
an assistant U.S. attorney in New York from 1990 to 1994.

“It sends a strong message that the enforcement division
is both stepping up to the plate and standing behind its case,”
said Jacob Frenkel, a former SEC enforcement division attorney,
who isn’t involved in the Goldman lawsuit. “It’s unusual, but
it’s a logical and brilliant move when you have skilled trial
lawyers who are part of senior management who step forward.”

Goldman Sachs, which reported record earnings last year,
and a company executive director, Fabrice Tourre, were sued by
the SEC in April for misleading investors in mortgage-linked
securities.

The SEC alleged the firm wasn’t forthcoming about the role
that a hedge fund, Paulson & Co., played in selecting and
betting against the instrument. New York-based Goldman Sachs has
denied wrongdoing.

Lucas van Praag, a spokesman for Goldman Sachs, didn’t
return a call or e-mail after regular business hours seeking
comment on yesterday’s filing by the SEC.

John Heine, a spokesman for the SEC, declined to comment.

The case is Securities and Exchange Commission v. Goldman
Sachs, 10-cv-03229, U.S. District Court, Southern District of
New York (Manhattan).

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Stanford, in Dershowitz Filing, Says Rights Violated

R. Allen Stanford, the financier accused of leading a $7
billion fraud scheme, has been deprived of his constitutional
rights by being held without bail before trial, lawyers
including Alan Dershowitz said in a court filing.

Stanford has been jailed since June when he was indicted by
a grand jury in Houston. U.S. District Judge David Hittner, who
is presiding over the case, has denied requests to ease his
confinement as the defense gets ready for a January trial.

“This court has not previously been asked to consider the
issues as a constitutional matter involving detention of a
predictable minimum of more than two years from arrest through
trial,” Dershowitz and lawyer Robert Bennett said yesterday in
the filing.

Stanford, 60, faces a 21-count indictment. Prosecutors
allege he and his associates ran a “massive” fraud scheme
involving the sale of certificates of deposit through Antigua-
based Stanford International Bank Ltd.

He has denied all allegations of wrongdoing.

Dershowitz, a Harvard University law professor who helped
defend former professional football player O.J. Simpson and
socialite Claus von Bulow, joined the Stanford defense team as a
consultant last month. He said then he would work only on the
issue of obtaining bail for the Texas financier.

“He’s presumed innocent, yet he is being treated worse
than a convicted defendant,” Dershowitz said then.

Hittner has twice denied Stanford bail. Both of those
decisions were upheld on appeal.

The judge yesterday rejected Dershowitz’s motion on
technical grounds involving type size and the standing of the
lawyers submitting it.

Justice Department spokeswoman Alisa Finelli said the
government declined to comment on the bid for bail.

The case is U.S. v. Stanford, 09cr342, U.S. District Court,
Southern District of Texas (Houston).

An internal report in July 2006 by Santander’s Geneva-based
Optimal Investment Services unit said Madoff was “shrouded in
secrecy” and had “no independent verification of trading” for
his firm, according to a copy of the study filed yesterday in a
class-action lawsuit in Miami federal court.

“Madoff Securities is a privately owned family business
which enhances control, but on the other hand, also increases
the possibility of collusion,” Optimal said in the report.
“Despite the above, we believe the organization is efficiently
and professionally managed.”

Santander was sued by a group of Optimal funds investors,
most from Latin America, in January 2009 over claims it failed
to protect them after discovering as early as 2002 that Madoff
didn’t follow industry standards by acting as custodian of his
own funds. Madoff, 72, pleaded guilty to operating a Ponzi
scheme in March 2009 and is serving a 150-year sentence.

A Santander spokesman declined to comment yesterday.

The 229-page amended complaint filed in October outlines
problems Santander identified in 2002. After the bank and
Optimal met with Madoff in September of that year, they revised
prospectuses for two Optimal funds that invested with Madoff to
say there was a “possibility” or “risk” Madoff could abscond
with their assets.

The case is In re Banco Santander Securities-Optimal
Litigation, 1:09-cv-20215, U.S. District Court, Southern
District of Florida (Miami).

For more, click here.

Rajaratnam Can’t See Khan’s SEC Records, Judge Rules

Galleon Group LLC co-founder Raj Rajaratnam can’t obtain
records from the U.S. Securities and Exchange Commission about
Roomy Khan, a government witness in the insider-trading case
against him, a judge said.

Rajaratnam faces both criminal and civil allegations of
insider trading. Khan, a former Intel Corp. executive who
pleaded guilty, is cooperating with the government in a bid for
leniency. Lawyers for Rajaratnam have been seeking records about
Khan from the witness herself, First Republic Bank and the SEC,
which brought the civil fraud lawsuit.

U.S. District Judge Jed Rakoff, who is presiding over the
civil case, yesterday granted Khan’s request for a protective
order barring Rajaratnam from obtaining records including images
of five computers Khan owned, financial documents such as a 2000
mortgage application, tax returns and appointment calendars.

“Pressed to justify this broad subpoena, all that counsel
for Rajaratnam could offer was a speculation that these records
contain ‘likely false’ statements that may be used for
impeachment,” Rakoff wrote in a three-page order. “It is clear
that this request amounts to little more than an impermissible
fishing expedition.”

“Counsel for Mr. Rajaratnam will seek re-consideration of
the court’s order in accordance with the suggestions by the
court,” Rajaratnam’s spokesman, Jim McCarthy, said in a
statement.

The case is SEC v. Galleon, 09-cr-8811, U.S. District
Court, Southern District of New York (Manhattan).

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American Express Wins Ruling Upholding Dismissal

American Express Co. won an appeals court ruling upholding
the dismissal of a shareholder lawsuit claiming the company
misrepresented its high-yield investments as safe.

The U.S. Court of Appeals in New York yesterday upheld a
lower-court judge’s 2008 dismissal of the case. New York-based
American Express was accused in the securities-fraud suit of
defrauding its investors from 1999 to 2001 by claiming in a
regulatory filing that its investments in high-yield debt
securities were conservative and that the bank had adequate risk
management controls.

“Importantly, the plaintiffs have not alleged any theory
as to why the defendants would knowingly mislead investors,”
the appeals court wrote in a 31-page opinion. A two-judge panel
agreed that the plaintiffs hadn’t alleged enough facts in the
complaint for the case to go forward.

The appeals court also said that a defendant won’t be held
liable for making a “forward-looking” statement, such as the
one in this case, if it’s identified as such.

The case is Slayton v. American Express, 08-05442-cv, U.S.
Court of Appeals for the Second Circuit (New York).

For the latest lawsuits news, click here. For the latest new
suits news, click here. For copies of recent civil complaints,
click here.

Verdicts/Settlements

Former Head of RBS Investment Bank Settles With FSA

Johnny Cameron, the former head of the Royal Bank of
Scotland Group Plc’s investment bank, agreed to never again hold
a senior-management role at a financial company in order to
resolve an investigation by Britain’s markets regulator.

Cameron, 55, reached an agreement with the Financial
Services Authority without admitting guilt or the regulator
finding him at fault as part of its probe of RBS’s systems and
controls, the agency said yesterday in a statement. The
agreement means he will be able to work as a financial
consultant.

“Given the losses sustained by RBS in 2008 I recognize
that it is appropriate I take my share of responsibility,”
Cameron said in a statement through his lawyer, Charles Evans of
London-based Norton Rose LLP. He said he wouldn’t seek another
senior-management position.

Cameron is the first executive of RBS, the Edinburgh-based
lender majority-owned by the U.K. government, to settle with the
FSA. RBS is facing five separate investigations following a 45.5
billion-pound ($65.6 billion) government bailout. The U.K.
Treasury ousted Chief Executive Officer Fred Goodwin when it
took control of RBS in October 2008. Cameron stepped down that
same month.

“We welcome the conclusion of this investigation with a
settlement between the FSA and our former director Johnny
Cameron,” RBS spokeswoman Lisa Irvine said.

Cameron wouldn’t get approval to become an executive again
now if he applied, the FSA said. As a way of improving risk
management, the regulator has made it harder for people to gain
approval to be executives that exert a “significant influence”
over firms. More than 400 candidates for senior-management jobs
were interviewed by the agency since October 2008, with about 30
withdrawing their applications, Jon Pain, the FSA’s managing
director of supervision, said yesterday at a conference in
London.

Were it not for the settlement, the regulator said it would
have taken steps to try to ban Cameron from the industry. He
worked in RBS’s investment-banking division for a decade,
joining the lender from Dresdner Kleinwort Benson, where he was
co-head of global finance.

For more, click here.

Ex-AKO Capital Trader Pleads Guilty in FSA Insider-Dealing Case

A former trader at AKO Capital LLP, a London-based hedge
fund, pleaded guilty to insider trading in a court yesterday.

Anjam Ahmad pleaded guilty at Southwark Crown Court in
London to one count of conspiracy to commit insider dealing,
relating to transactions involving 22 different companies
between June and August 2009, in a case brought by the U.K.
Financial Services Authority.

“I can make no promises as to sentence,” Judge Geoffrey
Rivli said at a hearing in London. “I hardly need tell you that
this is a serious matter.”

Robert Brown, Ahmad’s lawyer at Corker Binning, wasn’t
available to comment. Sentencing was scheduled for June 22.

AKO Capital, where Ahmad worked until September 2009
according to FSA data, hasn’t been accused of wrongdoing by the
FSA, the firm said last month.

FSA spokesman Joseph Eyre declined to comment.

For more, click here.

EMC Founder Egan Cheated IRS While Ireland Envoy, Judge Says

EMC Corp. founder Richard J. Egan used a sham tax shelter
to cheat the U.S. government out of more than $62 million
starting the same year former President George W. Bush named him
ambassador to Ireland, a federal judge ruled.

Egan, who died Aug. 29, used a variation of a widely used
transaction known as “Son of Boss” to avoid paying capital
gains taxes on more than $327 million in gains from stock or
options in Boston-based EMC, the world’s biggest maker of
storage computers, according to court papers.

In a 357-page decision, U.S. District Judge Dennis Saylor
in Boston ruled May 17 that Egan and his wife, Maureen,
concocted transactions with offshore entities to generate
artificial tax losses intended to wipe out his taxable gains.
The Egans were aided by nine advisers, including law firms and
accountants, Saylor wrote. The transactions were managed by
their son, Michael J. Egan, the judge said.

“None of the participants in these complex transactions
believed that they were real business transactions, with any
purpose other than tax avoidance,” Saylor wrote. “Indeed, it
is highly doubtful that any participant believed, even for a
minute, that the transactions would withstand legal scrutiny if
discovered.”

The law firms, dubbed “tax promoters” by Saylor, included
Proskauer Rose LLP and Brown & Wood LLP, which was acquired by
Sidley Austin LLP. Janet Zagorin, a spokeswoman for Sidley
Austin, said she had no comment because she hadn’t yet read the
case. Josh Epstein, a spokesman for Proskauer Rose, didn’t
return a call and e-mail seeking comment.

KPMG, which prepared the Egans’ tax returns, agreed in 2005
to pay $456 million to avoid criminal prosecution over its sale
of tax shelters such as the one used by the Egans.

The case is Fidelity International Currency Advisor A Fund,
LLC v. United States of America, 05-cv-40151-FDS, U.S. District
Court, District of Massachusetts (Boston).

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Huang, Once China’s Richest Man, Jailed for 14 Years

Huang Guangyu, the founder of Gome Electrical Appliances
Holding Ltd., was sentenced to 14 years in prison for graft,
completing the downfall of a school dropout who rose to become
China’s richest man.

The 41-year-old was found guilty of bribery and insider
trading by the Beijing No. 2 Intermediate People’s Court,
lawyers for Huang’s co-accused business partner Xu Zhongmin said
in phone interviews yesterday. Huang was also fined 600 million
yuan ($88 million), the state-run Xinhua News Agency said.

Huang, who built Gome into China’s biggest appliance chain
and amassed a fortune estimated at $6.3 billion in 2008, is the
highest-profile businessman snared by a government crackdown on
corruption.

Gome’s mainland China subsidiary, Gome Appliances Co., was
fined 5 million yuan by the court yesterday, a decision the Hong
Kong company said it respected. The unit had been indicted for
corporate bribery, according to an earlier Gome statement.

Huang was involved in bribing five government officials
with cash and properties worth 4.56 million yuan from 2006 to
2008 in exchange for corporate benefits, Xinhua said. Huang was
also found to have illegally traded HK$822 million ($105
million) from September 2007 to November 2007, the news agency
said.

For more, click here.

Dow Chemical Must Supply Arkema, Delaware Judge Rules

Dow Chemical Co., the world’s largest producer of acrylic
paint ingredients, must continue to supply a unit of French
business partner Arkema SA with contractually required
quantities of methyl methacrylate, a judge decided.

Arkema Inc. sued Dow May 10 in Delaware Chancery Court
contending it reneged on an agreement to provide the chemical,
used to make Plexiglas and automobile taillights. Dow blamed the
delivery slowdown on problems at a Deer Park, Texas plant.

Arkema asked Judge Donald Parsons Jr. to prohibit Dow from
allocating the chemical for itself or others “until they have
satisfied their obligations to Arkema.” Parsons granted a
temporary restraining order in a sealed ruling made public May
17 and in effect until June 13, according to court papers.

Dow notified customers this month it was declaring force
majeure, a contract provision that allows companies to avoid
penalties when they can’t meet supply agreements because of
circumstances beyond their control.

“Dow continues to work with all customers, including
Arkema, in the most fair and reasonable way,” said Bob Plishka,
a spokesman for Midland, Michigan-based Dow, in an e-mailed
statement. He said production of the chemical was restarted May
13 and “full operating rates are expected soon.”

Sybille Chaix, an Arkema spokeswoman, didn’t reply to voice
and e-mail messages after business hours in Paris.

Novartis AG’s U.S. pharmaceuticals unit should pay $190
million to $285 million in punitive damages on top of the $3.4
million awarded to a dozen women in a gender bias verdict, a
plaintiffs’ lawyer said in court.

A nine-member panel found in favor of female employees of
Novartis Pharmaceuticals, a U.S. unit of Europe’s second-largest
drugmaker, following a month long trial in Manhattan federal
court. The jurors’ $3.4 million award to the women for lost pay
and other damages May 17 came in the first stage of
deliberations. The second stage, over punitive damages, ended
yesterday without a verdict.

Jurors in the class-action lawsuit ruled May 17 that the
company discriminated against women in terms of pay, promotions
and pregnancy. David Sanford, a lawyer for the women, yesterday
asked them to award punitive damages that would force the Basel,
Switzerland-based company to pay from 2 to 3 percent of its
value, which both sides stipulated to be $9.5 billion.

“Novartis has been involved in systemic discrimination
since 2002,” Sanford, a lawyer for the women, said after
yesterday’s verdict. “The verdict supports the claims of 5,600
women.” Novartis has a 14,000-member U.S. workforce, the
lawyers said.

The drugmaker said May 17 it will appeal the verdict. Pam
McKinlay, a spokeswoman for Novartis, said yesterday the company
didn’t have any further statement about the punitive damages
request.

The case is Velez v. Novartis Corp., 04-cv-09194, U.S.
District Court, Southern District of New York (Manhattan).

For more, click here.

Deutsche Bank May Lose 2008 Meeting Case, Court Says

Deutsche Bank AG, Germany’s biggest bank, may lose an
appeals court bid to uphold decisions made at its 2008
shareholder meeting, including the re-election of Clemens
Boersig to its supervisory board, a court said.

The Frankfurt Higher Regional Court is likely to back a
lower tribunal that said shareholders weren’t properly invited
to the meeting, Judge Klaus Maier said at a hearing yesterday.
The invitation may have limited shareholders’ rights to appoint
a representative by seemingly requiring a three-day notice
period, said Maier. The court’s assessment is preliminary, he
said.

“We know that other appeals courts and judges take a
different view on the issue,” said Maier. “But we think the
way the invitation was drafted may have deterred some
shareholders to make use of their rights to be represented at
the meeting.”

The suit is one of many brought by Leo Kirch, the German
businessman who blames Deutsche Bank for the collapse of his
media empire. Among the plaintiffs is also Michael Bohndorf, the
Deutsche Bank shareholder targeted by detectives hired by the
lender after the 2006 annual general meeting when Boersig was
first elected chairman. Kirch and Bohndorf have opposed
Boersig’s election since then.

Deutsche Bank spokesman Detlev Rahmsdorf said the lender
won’t comment before the court issues its ruling.

The case is OLG Frankfurt, 5 U 144/09.

DiPascali Continues to Cooperate in Probe, U.S. Says

Frank DiPascali Jr., who pleaded guilty to helping Bernard
Madoff carry out the largest U.S. Ponzi scheme, continues to
cooperate with federal prosecutors in their probe of the crime,
lawyers said.

DiPascali pleaded guilty last summer and has cooperated
with prosecutors ever since in a bid for leniency when he’s
sentenced. In a letter to U.S. District Judge Richard Sullivan,
who’s presiding over DiPascali’s case, Assistant U.S. Attorney
Lisa Baroni asked to postpone DiPascali’s sentencing until at
least November.

“Mr. DiPascali’s cooperation remains active and ongoing,”
she wrote in a two-page letter made public yesterday in
Manhattan federal court.

DiPascali pleaded guilty to 10 counts, including
conspiracy, fraud and money laundering. He admitted misleading
thousands of clients at Bernard L. Madoff Investment Securities
LLC, saying no securities trades took place in their accounts.
Investors lost billions of dollars.

As part of his cooperation, DiPascali has been telling
prosecutors how he and others helped Madoff defraud investors by
using money from new clients to pay earlier ones.

The letter says DiPascali’s assistance helped prosecutors
bring criminal charges against Daniel Bonventre, Madoff’s
director of operations, and two Madoff computer programmers,
Jerome O’Hara and George Perez. All three have denied
wrongdoing.

The case is United States of America v. Frank DiPascali
Jr., 09-cr-764, U.S. District Court, Southern District of New
York (Manhattan).

For the latest trial and appeals news, click here.

Litigation Departments

Lehman Trustee Law Firm Got $84 Million in 19 Months

The trustee for Lehman Brothers Holdings Inc.’s brokerage
and his law firm were paid $84.4 million for 19 months’ work
liquidating the defunct affiliate, according to a bankruptcy
court filing.

Trustee James Giddens and the law firm Hughes Hubbard &
Reed LLP have been returning assets to customers of the
brokerage, Lehman Brothers Inc., since its parent filed the
biggest bankruptcy in U.S. history in September 2008 in New
York. Total charges for lawyers, accountants, services and rent
through April 30 were $321.7 million, the trustee said May 10 in
a report.

Alvarez & Marsal, the liquidator of the parent company, has
collected $262.2 million in fees over 18 months, according to a
regulatory filing last month.

“The trustee has met extraordinary challenges efficiently
and has greatly benefited the customers, creditors, and other
stakeholders of Lehman’s brokerage business, in the largest and
most complex bankruptcy in history,” Giddens said yesterday in
an e-mailed statement. “His professionals have processed more
than 124,000 customer accounts, are keeping custody of more than
72 billion records of customer and other data, and are managing
more than 13 billion shares of securities.”

About $66 billion in claims were originally filed against
the brokerage by more than 124,000 people and institutions
claiming to be customers, according to Giddens’s report.

The main case is In re Lehman Brothers Holdings Inc., 08-
13555, U.S. Bankruptcy Court, Southern District of New York
(Manhattan). The brokerage case is In re Securities Investor
Protection Corp. v. Lehman Brothers Inc., 08-1420, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).